By on August 15, 2009

On Friday, the last act of the ménage à trois between Volkswagen, Porsche and the Sheik of Qatar was consumated. After the supervisory boards of Porsche and Volkswagen had given their approving nods to Porsche becoming the tenth brand of Volkswagen, Sheik Hamad bin Dschassim bin Dschaber al-Thani signed on the dotted line and bought 10 percent of coveted voting shares in Porsche SE for his sovereign wealth fund Qatar Holding LLC. Qatar will also take over “most” (says Das Autohaus) of the options on VW stock. They paid €1b for a package of derivatives that gives Qatar access to a 17 percent stake in Volkswagen. As peace breaks out between Wolfsburg and Zuffenhausen, Volkswagen is set to attack a big enemy: Toyota.

When the amalgamation is finished in 2011, ownership in the new Volkswagen/Porsche conglomerate (which may be renamed to Auto Union AG) will be as follows:

- Piech and Porsche families: 35 to 40 percent.
- Lower Saxony: 20 percent
- Qatar: 17 percent
- Remainder: Widely held (or T.B.A.)

After years of infighting; everybody wins:

The Porsche/Piech families control the world’s second largest auto maker.

Lower Saxony keeps its largest employer in Lower Saxony and can veto any decision.

Qatar has bragging rights amongst fellow sheiks: They own a share of their favorite toymaker Porsche, and a good chunk of the currently most successful automaker on the planet.

Wendelin Wiedeking walks away with a golden parachute of €50m. €25m of that will be (in a tax advantageous way) donated to a charitable trust, and, as a nod to the cabal that kept Wendy’s popularity high, €1.5m will be donated to organizations that support retired and impoverished journalists.

The new Volkswagen/Porsche conglomerate has the right stuff to become the world’s largest automaker, said Volkswagen CEO Martin Winterkorn after announcing the successful consummation of the three-way nuptials. Lower Saxony’s premier Christian Wulff, who sits on the VW supervisory board and had a deft hand in Piech’s victory over upstart Wiedeking, sets the same goal. “It is our clear target to become the number one in the worldwide auto business,” Wulff declared to Germany’s Handelsblatt.

A bad case of hyperbola? According to OICA, the world’s official scorekeeper of auto production, Toyota had made 9.2m units in 2008, VW only 6.4.

This was 2008, this is now. In June 2009, ToMoCo’s year-to-date worldwide production was down 40.6 percent, whereas Volkswagen’s deliveries were down by only 5 percent. Volkswagen had little to lose in the USA, but is strong in the surging German, Chinese and Brazilian car markets. “Surpassing Toyota in terms of net profit and global production in 2009 suddenly looks like a strong possibility,” wrote Automotive News after looking at the astonishing numbers.

Don’t judge VW by their skinny cover(age) of the USA. If current trends continue, Volkswagen may very well rule the world by the end of this year. As of June 2009, Volkswagen had already surpassed Toyota: Volkswagen’s year-to-date deliveries in June were 3.1m, whereas ToMoCo’s worldwide production stood at a little less than 3m.

PS: That other German wedding, that of Opel, looks more and more like a severe case of DOA. Reuters says that a deal is not imminent and that “General Motors and the German government played down hopes on Friday of a quick decision on the sale.” This is so dead, it doesn’t even warrant a separate post on TTAC.

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18 Comments on “VW, Porsche, Qatar: Ménage à Trois Complete, May Be Number One This Year...”


  • avatar
    KatiePuckrik

    I think VW may be biting off more than they can chew.

    Firstly, if VW want to be the world’s number one, let them. Toyota never wanted the title and have been trying to play it down ever since they got it.

    Secondly, that difference of 100K car (that’s 100, 000 cars, not 100 kei cars!) is neglible. Toyota are starting to get some sales from cash 4 clunkers in the US (that area which VW messed up) and the speed is picking up on those sales (provided they can get stock to the dealers).

    Either way, it’s a win-win for Toyota.

    They either lose a title they didn’t want in the first place or keep the title by picking up (profitable) sales.

  • avatar
    psarhjinian

    Don’t judge VW by their skinny cover(age) of the USA

    No, do judge them by it. Their utter failure to understand the North American market, despite being part of it for half a century, speaks to a problem that will haunt VW in the years to come: an inability to realize that what they sell might not be what the market wants.

    Or to put it another way: corporate arrogance.

    VW’s competition (and by that I mean Ford, Toyota and to a lesser degree, Hyundai) have all done a fair-to-reasonable job at localising product for their global markets. VW has never done this: their take is that people will buy the same cars no matter where they are.

    VW is rather like GM in this respect: there’s a layer of arrogance that, on one hand, results in some brilliantly focused and engineered upper-trim products, but on the other causes them to forget that what they sell is not automatically what people will buy.

    Continuing to ignore North America could be fatal. One of the reasons Toyota tries so hard in every market is that they remember the “lost decade” and its effects on the JDM market. Were in not for the abwrackprämie, or if China was a little cooler, VW would have been behind the 8-ball.

  • avatar
    John Horner

    Is that picture from “Happy Feet Redux”?

    To the point of VW stumbling and bumbling in the US: Going forward the US is but one of many interesting car markets in the world. With only 5% of the world’s population and an ever shrinking share of the global economy, success in the US is a nice thing for a global industrial empire to have, but not necessary.

  • avatar
    mpresley

    VW has really downplayed their US presence, and it makes me wonder what they are thinking. First, their advertising is bizarre, geared mostly towards kids, and reinforces their image in the US as, at best, a niche brand, and, at worse, weird.

    I don’t think they are sure whether they want to be a Euro brand, or a “something-else” US brand. Recent comments from VW marketing types indicate that, for example, the Passat is a no-go because Americans are looking for larger, cheaper Chevy’s or Camrys, and most Americans don’t understand European finesse (tell that to Audi, BMW and Merc).

    Their current line-up is lacking any decent options: try to get a leather interior, or any engine except the 2.0 gas (2.5 gas in the Jetta) or TDI. It’s hard to play in the world of V6 power when all you offer is a 4 cylinder. At the same time, the car that does offer a V6 is pushing 40 large and sports a vinyl interior.

    Right now, the only compelling reason to buy a VW is probably the TDI, but unless you desire a Jetta or a 40K SUV it’s good-bye Charlie.

    My suggestion to VW: start marketing your cars to adults and not pimply faced, tattooed twenty somethings. Offer more models with TDI. Offer a better range of options other than molded rubber floor mats and bogus sport body trim. Memo to VW: the people really don’t want 20 sets of alloy rims to choose from, but maybe something useful like power memory seats might be nice.

    Obviously quality and a good dealer experience are necessary, so this would be the first place to start.

  • avatar
    texlovera

    Well, if VW doesn’t WANT to play in the US market, I for one will not be crying over it. And I agree that they seem to be coming off a bit to “GM-ish” lately.

    Funny what a difference about 70 years makes…

  • avatar

    @mpresley: It’s too bad, especially when so many things VW does mechanically are so modular; -you’d think they’d extend the same concept across every type of Lego-block there is.

    Ex: You used to be able to swap a VR6 engine into a car 10 years older than it, with not too many problems. The 20v 1.8T engine was much more challenging, but a couple were actually done.

  • avatar
    Robbie

    The US market holds low profits on regular cars and needs vehicles that are quite US-specific – large vehicles with large engines; and SUVS and pickups are more important here than anywhere else in the world. VW’s focus on the rest of the world – intentional or not – seems very sensible to me.

    Golfs and Passats will sell anywhere but in the US, but they are getting those cars exactly right for the rest of the world.

  • avatar
    stuki

    I agree with psarhjinian, “do judge them by it.”

    Being number one on the back of a home market sales gimmick in a comparatively navel gazing home market, and your strategy of plowing into every “emerging” market on the planet paying off big in China, is not the stuff lasting dominance is built from.

    More than simply being large, the NA market is also the most pragmatically competitive one anywhere. Americans are, some would say to a fault, open to products from anywhere if they perceive them as the best value. They’ll buy the “best” and “cheapest” regardless of who offers it. So, prices here are low, and selection of the kind of models that could hope to sell in volume, high.

    Toyota spanking VW here in anything from Scion vs. Polo and Camry vs. Passat to Lexus vs. Phaeton does speak volumes about how the two will likely stack up as car markets in other parts of the world mature. Assuming relatively static strengths and strategies, of course. If the next few generations of Passat is consistently bigger, better built and cheaper than the Camry, I’m sure the top spot both here and worldwide is not out of reach. But that happening is not something I’d bet my own money on.

  • avatar
    vento97

    Continuing to ignore North America could be fatal.

    You OVERESTIMATE the importance of the North American Market. It’s just a small slice of the world’s market when looking at the big picture.

    The world does not revolve around the USA only…

  • avatar
    dantes_inferno

    I agree with psarhjinian, “do judge them by it.”

    Methinks we are overestimating the importance of the U.S. Market.

    Toyota spanking VW here in anything from Scion vs. Polo and Camry vs. Passat to Lexus vs. Phaeton

    Scion is a U.S.-only brand (as was Lexus until recently), and the Polo was never sold in the U.S. market, so those comparisons are a moot point.

  • avatar
    charly

    @Stuki

    I think you are wrong. America is a developed market with cheap gas and easy parking. The only other markets for which that is true is the Middle East and maybe Russia. So cars that sell well in the US don’t sell well in the rest of the world.

  • avatar
    psarhjinian

    Methinks we are overestimating the importance of the U.S. Market.

    North America** is three hundred and fifty million people living in a developed, mature economy. Or, about half the population of Europe, but with more than 85% of it’s GDP. Or about five times that of China, but with a third of the population.

    It doesn’t matter what you say about growth potential or Brazil, India or China, that’s too significant a market to be a failure in. Ask Nokia (or better yet, ask Ericsson) if it’d be okay to just hand North America over to Motorola or Samsung. They would tell you that even if it’s reached it’s zenith, it’s still too big a market to either ignore or consistently screw up in. That’s not a “small slice” of the global economy—if it were, the credit and housing crises wouldn’t have brought markets across the planet to their knees.

    You cannot be a global company and not have a sales presence there, just as you cannot avoid having a sales presence in certain other markets if for no other reason than it exposes you to regional fluctuations. This is why FIAT took Chrysler and why Nissan/Renault seriously considered GM: they need to reach a level and scale that you cannot achieve without having a presence in this market.

    VW has a functionally insignificant presence in North America; Toyota does not have that kind of gap anywhere on the globe. VW should be using the breathing room that their luck gave them and shore up what is a serious, sucking hole in their corporate presence. Develop some product that will sell, take advantage of or flat buy out someone. Don’t just sit there and assume the whole world will buy Golfs.

    ** (the US and Canada; if you add Mexico, it’s even more)

  • avatar
    stuki

    dantes_inferno,
    If VW felt they could sell Polos the way Toyota sold Scions (not necessarily sells them anymore :) ), I’m sure it would be here. After all Scions weren’t sold in the US either, until someone figured they would sell here. As for going up against Lexus, at least VW tried. With even less success than they had with the Passat.

    charly,
    America is also a huge market with high disposable incomes and low car prices, meaning more people can pick their from higher up the rung than people in most countries. As the rest of the world gets wealthier, I would expect them to ape contemporary America more than future America will ape contemporary them.

    It was interesting to look at the car choices of Iceland as they rapidly became (or at least thought they had become) wealthy over the last decade. It was basically American style big SUVs up and down the line. An acquaintance of mine was picking these up cheap and selling them on the continent once the Icelanders realized they weren’t really that wealthy, after all. Repo man, viking style. I realize Iceland is tiny, and not really typical of anything, but not long ago they were Europeans who “preferred” smaller cars. Oil rich Norway is another market with an increasing fleet of SUV’s, despite disgustingly high taxes on both gas and gas guzzlers. So don’t be surprised to see the world ape America again, once they have the income relative to car prices to be able to afford it.

  • avatar
    charly

    Disposable income doesn’t matter that much as you can only drive one car at a time. And the rest of the world simply can’t ape America. Rest of the world has a parking problem, so cars need to be small, and a gas tax, so cars need to be efficient.

    European and Japanese cars are smaller for the same luxury with more money spend on efficiency. You can sell a for EU/JP designed car in America when you decontent it., which is cheap to implement. To sell a for America designed car you need to upcontent it and make it more efficient, which isn’t cheap.

  • avatar
    fgbrault

    I sure hope that VW does not make boring cars like Toyota to gain market share in the USA. I will be happy ifg they never move to number 1, as long as they continue to make the type of cars they sell here now.

  • avatar

    Bertel, two points:

    “Sheik Hamad bin Dschassim bin Dschaber al-Thani” — “…bin Jasseem bin Jabar”, or something very much like it, would be the more common English transcription, I think. [Edit: \"Hamad bin Jassim bin Jaber Al Thani\", according to Wikipedia: http://en.wikipedia.org/wiki/Hamad_bin_Jassim_bin_Jaber_Al_Thani ]

    “Auto Union” — you think so? A) Doesn’t that sound, not to put too fine a point on it, too Hitler-y? and B) Won’t it be a bit of a three-legged stool, when one of the brands represented by the four rings (and the most prestigious one to boot — albeit apparently too Hitler-y, as it hasn’t actually been used since WWII), Horch, is owned by Daimler-Benz?

  • avatar
    ZoomZoom

    Okay, that picture doesn’t look like anything risque is going on.

    It just looks like some dead bodies carelessly stacked up…

    Here we go again?

  • avatar

    VW is catering for the US market:

    Polo – you can’t get it at any price, not even the truly pointless Polo sedan. This would be a great sub-compact car. I will most likely buy a Polo GTI in the next few months as it’s a bit bigger and way faster than my old Golf III GL.

    New Beetle – designed in the US for the US market. Sells poorly in most markets. I loved my turbo New Beetle.

    Jetta – a rather pointless sedan. Outsells the Rabbit 4 to 1 in the USA. Sales are unheard of outside the NA market. Covers the compact sedan market segment. I am surprised they sell the Rabbit in the USA as the New Beetle outsells the Rabbit. I loved my Rabbit.

    Passat – sells well in the USA, not so well outside the US market. I am not sure it was designed solely for the US market considering its B platform underpinnings. This is a large car in Europe, but barely mid size in the USA.

    Tiguan – a small CUV recently on sale. I don’t know enough about the sales history of this cute ute, but this segment is on fire in pretty much every market as folks abandon the mommy SUVs and soccer mom vans in droves.

    Tourareg – A CUV that no one asked for. Sells poorly everywhere but the USA. Covers the larger CUV segment.

    The 2.5 five cylinder engine is sold nearly nowhere else – it’s a lumpen torque monster as most US folks like their grunt down low. Australia gets the much faster, much more economical TFSI super AND turbo charged (i.e. twin charged) 1.4 litre engine. Not only does the 1.4 get 15 kW more than the 2.5, it drinks about 2/3rd the fuel under all circumstances. But if you said to the average consumer, here’s a 1.4 litre engine, they’d laugh and ask for a real engine whilst not realizing how awesome the 1.4 is. I doubt the US will see this wondrous little engine any time soon.

    More to the point, VW caters for the US market in little ways you take for granted. Not only do you have cup holders (!), but you have air con that works whilst the sun roof is open, both things that the German engineers apparently fought against (see “Getting the bugs out” for my source on this one).

    Andrew


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